Economic relief: move past the impasse — take the WHO & HOW MUCH out of the equation!

Luca Donà, Jeremy Dilbeck

For the past several months the negotiations about the next economic relief package have sputtered on and off but have failed to deliver any help.

In the meantime, the continued absence of relief and increased shut down measures have brought entire business sectors (e.g. restaurants) to a place where many are running on fumes.

We are now right at the edge of the tall cliff of bankruptcy for hundreds of thousands of businesses. Likewise, millions of households face looming evictions. Failure to act will cause the crisis to spread to the financial and real estate sectors, converting temporary loss of rents and interest revenues into long-term capital losses.

While the US economy has shown strong resilience and has bounced back from the lows of last spring, the recovery is destined to be K-shaped — unless immediate action is taken. If not, the life and livelihood of millions will be dramatically damaged.

The path of least pain

We absolutely should — if we can — stem the rapidly accelerating avalanche of closures, bankruptcies and evictions. Keeping existing businesses alive will lead to a much faster recovery than letting businesses fail and waiting for new business formation and job creation. Preventing financial devastation to millions of people facing eviction, and the long-term cascade of consequences that will arise from that is critical.

This path will also cause much less pain to all the people involved.

“Time Suspended”

We have already discussed in prior articles why traditional relief and stimulus packages that cost the government trillions, are inefficient and unsustainable, and have put forth a purely legislative proposal — which we call “Time Suspended” — and have explained why it is very much more efficient.

As a brief recap, Time Suspended sets ALL interest rates on ALL financial assets, ALL unproductive business real assets, and ALL personal mortgages to 0% on all preexisting contracts while the crisis lasts; and concomitantly sets a grace period for any installment, and extends all contracts by the same amount of time, as appropriate.

The key differentiator, with respect to other ideas, is that the paradigm is to be applied to the entire economic chain so that the burden is shared across the much larger base of the entire economy — and not simply shifted onto another set of economic agents (e.g. from tenants to landlords).

We refer interested readers to a more detailed explanation of “Time Suspended”, why it works, how it works, and its effects on the various kinds of economic agents and the government in the academic paper on SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3635812

Also the more comprehensive article Last Train to Fast Recovery can be found here https://tinyurl.com/y65md49t

Help Now — Argue Later

The purpose of this article is to point out that because Time Suspended requires NO cash outlay on the part of the government, the “How Much?” and “To Whom?” can be taken out of the equation: Lawmakers can help now and argue later about additional, targeted relief.

An additional benefit is that much less of it will be required — in terms of monetary outlay — because the bulk of the burden will have already been taken off as Time Suspended lets the relief automatically flow through the system and reach the economic agents that need it the most — be they businesses, households or local governments.

So, let’s do this now — and discuss the additional relief later — without letting the patient die while treatment is being debated.

Dr. Luca Donà, PhD
mathematician: Economics, Finance, Game Theory, Risk
– www.lucadona.com; @LucaDonaV

Jeremy Dilbeck, MPP, Intl. Trade & Finance